Reliance could be penalised for gas shortfall

India is considering a penalty for Reliance Industries for falling short of targeted gas production at its D6 block, an oil ministry source said on Wednesday.

The gas from the block, India's second-biggest producer after the Mumbai High field, is sold to buyers prioritised by the government at an agreed pricing formula.

Reliance has just agreed a partnership with multinational operator BP on field development.

"It is under examination ... (the upstream regulator) is looking into it," the source said when asked if the government would penalise Reliance for not adhering to its committed work programme.

He did not give any indication what the penalty might be. Reliance declined to comment.

The source, who spoke on condition of anonymity, said Reliance had been told to cut gas supply to non-priority sectors in order to meet demand from fertilizer and power users.

Reliance is pumping 28 percent less gas than it should from the key block, India's upstream regulator said earlier this month and added it would meet with the company.

The upstream regulator said Reliance had not given a satisfactory reason for lower output and had not drilled as many wells as planned. Shares in the company were down 1.6 percent by 0913 GMT as leading shares edged 0.33 percent lower.